Will third time be the charm for Astellas?

Twice rejected by CV Therapeutics, Astellas takes $1.1 billion bid to shareholders

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TOKYO, Japan—Twice rebuffed in its bid to acquire U.S. biotechnology firm CV Therapeutics Inc. (CVT), Astellas Pharma Inc., Japan's second-largest drug maker after Takeda Pharmaceutical, announced Feb. 27 that it launched a cash tender offer to acquire all outstanding CV Therapeutics shares at $16 a share.

The offer represented a 41 percent premium to CVT's closing share price on Jan. 26, the day prior to the public disclosure of Astellas' second proposal, and a 69 percent premium to CVT's 60-day average closing price ending Jan. 26. The tender offer is not conditioned on financing and represents a total equity value of approximately $1.1 billion. The offer expires March 27.

The offer is higher than Astellas' original bid for CVT, made in November when the company's stocks were trading under $9. CVT rejected both that bid and Astellas' January offer, concluding it was not in the best interests of the company and its stockholders.

Astellas said it still prefers to reach a negotiated agreement, but the "refusal to engage with us regarding our proposal has left us with no alternative but to take our offer directly" to CVT's stockholders. The company added that the offer represents "immediate cash value that exceeds what the company could reasonably expect to deliver on it own, particularly given current uncertain market conditions and execution risks inherent in CVT's stand-alone strategy."

CVT urged its stockholders to take no action on Astellas' offer. It also extended the expiration date of its shareholder rights plan from Feb. 1, 2009 to Feb. 1, 2010 to fend off hostile takeovers. Astellas said it filed a lawsuit against CVT in a Delaware court over the renewed shareholders' rights program. CVT did not comment on the lawsuit by press time.

According to Astellas, its interest in acquiring CVT was spurred by a strong yen and the chance to pursue business outside of its native Japan. Masafumi Nogimori, Astellas president and CEO of Astellas, said the offer was made because CVT's product portfolio, including its angina treatment agent Ranexa—which saw nearly $100 million in sales last year—would complement Astellas' U.S.-based hospital and cardiology business. Astellas also owns the U.S. rights to CVT's drug Lexiscan, which is used in patients who cannot exercise sufficiently for a coronary stress test. In turn, Astellas' infrastructure and commercialization track record would provide an ideal platform to increase CVT's value, Nogimori added.

"Astellas has built a productive partnership with CV Therapeutics around Lexiscan over several years, and we have watched and helped the company grow during this time," Nogimori wrote in a letter to CVT's board of directors. "We are enthusiastic about Ranexa, but we believe it will be a significant challenge for CV Therapeutics to deliver the full value of Ranexa to your stockholders given CV Therapeutics' limited commercial presence and the difficult macro environment. We believe Astellas is better positioned to maximize the value of CV Therapeutics, and Ranexa in particular, by leveraging Astellas' infrastructure and marketing expertise."

CVT's stock rocketed to $16 on the news and has been holding steady ever since. Most analysts speculate that Astellas will come back with a higher bid, perhaps around $20 per share, in the next few months.

"At this time, we advise CVT shareholders to hold onto their shares for a potentially higher offer from Astellas," said Jason Napodano, a Zacks Investment Research analyst. "However, above $20 per share we view expectations and the valuation as too high, and would recommend booking profits on the shares."

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